Philippine Defense Chief Eyes Subic Bay Amid Chinese Takeover Fears

The USS Boxer, an American navy ship, arrives at Subic Bay, northern Philippines, ahead of a bilateral military exercise with Filipino troops, Sept. 16, 2013.

AP

Philippines authorities should take over a major shipyard that sits on the site of a former U.S. navy base, or risk letting it fall into the hands of the Chinese who could use it as a regional foothold amid contentious South China Sea claims, Filipino officials said Thursday.

Defense Secretary Delfin Lorenzana said he had met with President Rodrigo Duterte and other officials on Wednesday, including Foreign Secretary Teodoro Locsin, to discuss ways for the Philippines to take over the facility in Subic Bay from its failing South Korean operator and keep it in local hands.

A state-run company is among two Chinese firms that have expressed interest in taking over the shipyard after South Korea’s Hanjin Heavy Industries and Construction filed for bankruptcy last week, according to local media reports.

Manila was also studying the prospect of offering the shipyard operations to players from the United States, Australia, South Korea and Japan – countries that are all considered as allies by the Philippines, the defense chief said.

“The Philippine Navy suggested that ‘why not the Philippines take over so that we’ll have a naval base there? Then we’ll have ship-building capabilities,’” Lorenzana said during an annual event in Manila of the Foreign Correspondents’ Association of the Philippines.

He said Manila was looking to purchase more ships in the next decade, and it would be advantageous for it to have the shipyard under its control.

“The most critical external security challenge for the Philippines is the territorial and maritime claims in the South China Sea,” Lorenzana said. “Compounding the issue is the backdrop of a rapidly evolving regional environment, where the United States-China geopolitical rivalry is deepening and a potential Taiwan Strait conflict is brewing.”

He noted that Washington remained the Philippines’ “only treaty ally” despite Duterte’s military pivot to China since he became president in mid-2016.

“China, our big, next door neighbor, has occupied and militarized some features closer to our shores,” the defense secretary said. “We have not, and we will not, surrender any part of our territory.”

However, a “constructive approach” was needed to engage China in the future, he said.

“The goal is to pursue functional cooperation with China and with other claimant countries,” Lorenzana said, adding that a 2016 international arbitration tribunal ruling in favor of Manila was “valid and legitimate.”

U.S. officials were not immediately available to comment on the news around Subic Bay.

A ‘very significant national security issue’

Philippines defense sources, meanwhile, have said that Beijing may seek to gain control of Subic, a strategic former naval base to use it as a monitoring post.

Former Philippine navy chief Alexander Pama, in particular, warned that Subic was a “very significant national security issue” beyond business matters.

“The ownership of the shipyard in Subic will give owners unlimited access to one of our most strategic geographic Naval and maritime asset,” Pama said, according to the Philippine Inquirer.

He noted that while the shipyard would remain a commercial interest on paper, “nothing can prevent the owners from making it into a de facto naval base.”

Filipino Sen. Richard Gordon, who was once the mayor of the town where Subic is located, on Thursday also proposed that the government enter into a deal with local businessmen and some unidentified South Korean investors in a bid to take over the Hanjin operations.

He said the shipyard was “a very important” logistical and engineering resource that the country should control.

“We should take over the shipyard if needed. The important thing here is that the Philippines will be able to make its own ships,” said Gordon, who met with Lorenzana and other senators on Wednesday.

Gordon said the Philippine Navy should have its headquarters inside the shipyard, on Luzon’s western side facing the South China Sea.

Subic, along with the nearby Clark Air Base, used to host one of the largest U.S. military facilities outside of the mainland United States. The bases were key staging points during the Vietnam War.

At the end of the Cold War, the last U.S. military ship sailed out of Subic in 1992 after a nationalist Philippine Senate voted then to end a lease agreement, which allowed the Americans to operate in the area for years.

Last week, Hanjin Philippines, the local unit of South Korea’s Hanjin Heavy Industries and Construction, filed for rehabilitation after it defaulted on some U.S. $400 million in loans, reports said. The firm also owed about $900 million to creditors in South Korea.

Two unnamed major Chinese shipbuilders have expressed interest in taking over the failed shipyard in Subic, which would effectively allow Beijing to gain a strategic foothold into the Philippines, its territorial rival in the South China Sea, critics said.

Supreme Court Justice Antonio Carpio, who was part of the Philippine legal team that argued the arbitration case in 2016, warned that China was moving to occupy areas, even including shorelines.

“The intention of China is very clear. They want to control the West Philippine Sea,” Carpio said, using the Philippines name for the South China Sea. He said Beijing was still intent on “grabbing” Manila’s exclusive economic zone, despite international condemnation.

Allowing Beijing to gain a toehold into Subic could give the Chinese an edge in pressing their territorial claims in the disputed sea region, said Carpio who had publicly opposed Duterte’s pro-China stance.

“Why would we allow the Chinese to get a foothold in Subic when they are trying to seize the West Philippine Sea just across?” he said. “It doesn’t make sense.”